Distressed homeowners seeking mortgage relief could get stuck with a big tax bill

The Washington Post reports:

In 2007, Congress adopted a law that spared those homeowners from being taxed on the amount of the loan that was forgiven.

But that tax break expired in December, and now the forgiven debt can be counted as income by the IRS. Housing advocates worry that the lapse could scare homeowners away from making a deal with their bank, which could disrupt efforts to reduce foreclosures and harm borrowers who were just getting back on their feet.

The great moments of central planning real estate.